The Globalization Paradox

Thu, 22 Dec 2016

I recently finished Dani Rodrik’s 2012 book “The Globalization Paradox”, which I found excellent: as an economic history of globalization, as a critique of the theory that has underpinned economics over the past 30 years, and as a guide towards a more sustainable version of globalization.

The central idea of the book is that there will always be tension between globalization, democracy and national self-determinism.  While many economists and technocrats seem happy to advocate the giving up of national sovereignty (and I suspect they’d be happy to give up democracy too), Rodrik questions the viability and sustainability of that approach.  That isn’t to say he is anti-globalization - he just argues that whatever globalization we have must be built on national democracy, otherwise individual countries won’t enforce the global market’s rules and outcomes.  

This is a perspective that I’ve been gradually coming to myself, watching Brexit, and the collapse of global trade agreements.  Unfortunately, it is a view that is often drowned out, both by nationalists who refuse to accept that globalisation can be good for a country, and globalists who just assume, without question, that globalisation must be good for the country.  Rodrik helpfully clarifies the conditions under which globalisation will help a country, with many examples from history.

I enjoyed the history - both of 18th and 19th centuries (for example the British East India Company and the Hudson Bay Company, and also the differing approaches between the Northern and Southern states of America), and also the 20th century with war, depression, economic miracles and basket cases.  Rodrik writes with an engaging style, and has the advantage that he isn’t trying to convince us of any absolutes, just that things are a bit more complex than you might have heard from the orthodox economic version of history (or any version that blames everything on a bunch of malevolent bankers and politicians).
So what next?  Rodrik is clearly impressed by the balance achieved within the 1944 Bretton Woods agreement, which provided ways for countries to interact, while allowing plenty of room for countries to take into account their individual circumstances and to meet the demands of their own citizens.  Obviously the world has moved on since then, and he isn’t arguing for us to blindly copy the solutions from 1944.  But it does show a precedent for the kind of balance that can be achieved: we can strive for a future in which nations consciously and sustainably interact.